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ACAMS2018: Effective AML for the New Era of Financial Services

What is your risk tolerance? Are you aggressive or do you fall more on the conservative side? Do you embrace the latest innovations or wait to see how they play out?

Financial institutions (FIs) have a risk threshold that has been designed to mitigate potential harm that could be done by doing business with customers and other organizations. As fintech has caused disruption in the financial services industry, some viewing this as good and some as bad, FIs look at these companies dealing with virtual currency or different payment methods as high risk and may not be as receptive to entering this space.

The panel, Fintech Safety Check: Effective AML for the New Era of Financial Services at the ACAMS 17th Annual AML & Financial Crime Conference, consisted of fintech companies and traditional money services businesses (MSBs), discussed how to assess the risk in working with fintech companies and the maintain the appropriate AML rigor.

In evaluating the risk appetite in working with fintech companies, the group noted three avenues that manifest. Either the FI is already working or considering working with fintech companies, they are onboarding fintech services or building those services internally, or the FIs view fintech companies as competitors.

One advantage fintech companies can offer is by being more nimble with payment processing, and as FIs work with these organizations, FIs need to have a robust AML monitoring system. Additionally, there needs to be a solid understanding of the partnership, sharing of information between each organization and updated policies/procedures to reflect changes in onboarding.

The panel emphasized that FIs and fintech companies need to effectively manage risk without stifling innovation and reminded the room that good AML “hygiene” is static regardless of whether you are a traditional MSB or a fintech organization.

The panel concluded that this relationship can be strengthened by better understanding each other and working collaboratively while managing expectations. Organizations must make a concerted effort to understand the product or customer that is being onboarded, establish clear expectations regarding reporting, policies and procedures, and perhaps most important, learn from mistakes and adjust programs as needed.

The closing comment from the panel affirmed how fintech organizations are already entrenched in the industry: regardless if FIs are leveraging fintech products, partnering with fintech or competing with it, FIs can’t opt out of this space.